Netflix moves ahead with Open Connect

Netflix Inc. (Nasdaq: NFLX) is serious about building its own content-delivery network—which is good news for some and not-so-good news for others.

The news is good for Intequus, which Netflix named as its systems integrator for what it's calling its Open Connect Appliance Hardware initiative. As such, Intequus is expected to design and manufacture data-center appliances that let Netflix stream movies and television content to more than 23 million subscribers.

Each Intequus appliance will reportedly feature more than 100 terabytes of storage, 10 gigabytes of network throughout and a Quad Core Intel Sandy Bridge CPU with low cooling requirements built around a rack-mount, four-unit server chassis.

"Customers like Netflix know exactly what they want and it's our job to get our hands dirty and apply our hardware design and integration skills to consistently deliver on those requirements," Dave Guzzi, general manager at Intequus, said in a statement.

Of course any sort of Netflix self-initiative is bad news for companies like Akamai, Limelight Networks (Nasdaq: LLNW) and Level 3 Communications (NYSE: LVLT), all of which have money-making systems to carry Netflix content.

All three companies' stocks were hit by the news with Akamai falling 5.3 percent, Limelight dropping off 9.3 percent and Level 3 slipping 7.2 percent as of Tuesday morning opening.

For Netflix, though, it's convert or perish.

"The world's other major Internet video provider, YouTube, has long had its own content delivery network. Given our size and growth, it now makes economic sense for Netflix to have one as well," Ken Florance, Netflix's vice president of content delivery said on a company blog.

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